The General Office of the Ministry of Human Resources and Social Security of China officially released the Compliance Guidelines on the Implementation of Non-Compete Restrictions by Enterprises (Renshetingfa [2025] No. 40) on 4 September 2025, aiming to give non-compete compliance guidance to enterprises. The guidelines shall take effect from the date of release.
The key points of the guidelines are as follows:
Clarify that non-compete agreement only applies to senior management personnel, senior technical personnel, and other personnel with confidentiality obligations who are aware of trade secrets of the enterprise.
Specify that restriction on employment shall be limited to other enterprises that produce or operate similar products or engage in similar businesses and have competitive relationships with the enterprise. The restricted area shall be consistent with the business operation areas of the enterprise, and nationwide or worldwide restrictions without sufficient reasons are not accepted.
Specify that the non-compete period shall be reasonably determined based on the degree of confidentiality of the employee and the validity of the trade secret, and the maximum period is 2 years.
Refine the payment standards for non-compete compensation
(1) The monthly economic compensation shall generally not be less than 30% of the employee's average monthly salary over the 12 months prior to the termination of the labour contract, and shall also not be less than the minimum wage standard of the place where the labour contract is performed.
(2) If the non-compete period exceeds one year, the monthly economic compensation shall generally be no less than 50% of the employee's average monthly salary over the 12 months prior to the termination of the labour contract.
Specify that the amount of liquidated damages for violation of non-compete obligations shall be reasonably determined based on the potential economic losses resulting from the employee’s disclosure of trade secrets and the amount of economic compensation paid by the enterprise, which generally shall not exceed 5 times the total agreed amount of non-compete economic compensation. If the losses of the enterprise exceed the amount of liquidated damages, extra compensation may be claimed.
Specify that the enterprise shall pay non-compete economic compensation to the employee in monetary form on a monthly basis during the non-compete period, and shall not refuse to pay on the grounds that non-compete compensation is already included in the normal salaries and bonuses paid to the employee.
Specify that if an enterprise fails to pay economic compensation in a timely and sufficient manner for more than one month after being reminded by the employee, or for more than three months without payment, the employee may no longer fulfill the non-compete obligation.
Specify that during the performance of the non-compete agreement, the enterprise may negotiate with the employee to pay additional compensation to terminate the non-compete agreement in advance. If the negotiation fails, the additional compensation can be paid according to a standard of no less than three months of economic compensation.
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The General Office of the Ministry of Human Resources and Social Security of China officially released the Compliance Guidelines on the Implementation of Non-Compete Restrictions by Enterprises (Renshetingfa [2025] No. 40) on 4 September 2025, aiming to give non-compete compliance guidance to enterprises. The guidelines shall take effect from the date of release.
On 24 April 2025, the National Development and Reform Commission, the Ministry of Commerce, and the State Administration for Market Regulation officially released the "Market Access Negative List (2025 Edition)". This is the fourth revision since the first version of the list was released in 2018 in China.
